Domtar Corporation Reports Preliminary Fourth Quarter and Fiscal Year 2017 Financial Results; Announces Increase to its Quarterly Dividend

(All financial information is in U.S. dollars, and all earnings per share results are diluted, unless otherwise noted).

  • Fourth quarter 2017 net loss of $5.42 per share; earnings before items1 of $0.64 per share
  • Price increases announced for pulp and several uncoated freesheet grades
  • Announced a 4.8% dividend increase

FORT MILL, S.C.–(BUSINESS WIRE)–Feb. 8, 2018– Domtar Corporation (NYSE: UFS) (TSX: UFS) today reported a net loss of $340 million ($5.42 per share) for the fourth quarter of 2017 compared to net earnings of $70 million ($1.11 per share) for the third quarter of 2017 and net earnings of $47 million ($0.75 per share) for the fourth quarter of 2016. Sales for the fourth quarter of 2017 were $1.3 billion.

Excluding items listed below, the Company had earnings before items1 of $40 million ($0.64 per share) for the fourth quarter of 2017 compared to earnings before items1 of $65 million ($1.03 per share) for the third quarter of 2017 and earnings before items1 of $47 million ($0.75 per share) for the fourth quarter of 2016.

Fourth quarter 2017 items:

  • Non-cash goodwill impairment charge associated with Personal Care of $578 million ($573 million after tax);
  • Closure and restructuring costs of $2 million ($1 million after tax);
  • Deferred tax benefit of $186 million related to the U.S. Tax Cuts and Jobs Act of 2017 (U.S. Tax Reform); and
  • Net gain on disposal of property, plant & equipment of $9 million ($8 million after tax).

Third quarter 2017 items:

  • Gain on disposal of property, plant & equipment of $4 million ($3 million after tax); and
  • Partial reversal of contingent consideration related to an acquisition of $2 million ($2 million after tax).

Fourth quarter 2016 items:

  • Closure and restructuring impact of $(1) million ($(1) million after tax); and
  • Negative impact of purchase accounting of $1 million ($1 million after tax).

FISCAL YEAR 2017 HIGHLIGHTS

As a result of its annual goodwill and indefinite life intangible assets impairment tests, the Company recorded a non-cash goodwill impairment charge of $578 million associated with Personal Care. Growing competitive market pressures in the healthcare and retail markets over the last year, including the entry of new competitors in the private label category, excess industry capacity and the decline of healthcare spending by governmental agencies, are expected to result in lower than previously anticipated sales and operating margins. In light of this weakened market outlook, our current business forecast was not sufficient to support the carrying value of the goodwill associated with Personal Care, leading to the impairment.

Commenting on the full-year results, John D. Williams, President and Chief Executive Officer said, “We generated nearly $450 million of operating cash flow and continued our solid track record of rewarding shareholders with a high payout ratio while maintaining financial flexibility. Our performance, combined with our confidence in our cash flow generating capabilities, enable us to announce a 4.8% dividend increase. Looking ahead, we remain focused on maximizing long-term profitability and value creation.”

QUARTERLY REVIEW

“As expected, higher maintenance and seasonally higher operating costs impacted our fourth quarter Pulp and Paper results,” said John D. Williams, President and Chief Executive Officer. “Nevertheless, pulp price realizations were higher and we shipped record volumes of tissue grade and fluff pulp. Recently announced price increases across a number of pulp and paper grades are expected to drive continued momentum into 2018.”

Commenting on Personal Care, Mr. Williams added, “While we had good results in 2017, we have concluded that the performance of our Personal Care business will continue to be impacted by an increasingly competitive market. We remain optimistic about the long-term growth trajectory of the absorbent hygiene market; however, this increasingly competitive market will negatively impact our sales, and we expect the environment to remain challenging for the foreseeable future. Importantly, the goodwill impairment charge is non-cash. It does not alter our current financial flexibility, and our overall cash generating capabilities remains strong.”

Operating loss was $512 million in the fourth quarter of 2017 compared to operating income of $89 million in the third quarter of 2017. Depreciation and amortization totaled $82 million in the fourth quarter of 2017.

Operating income before items1 was $59 million in the fourth quarter of 2017 compared to an operating income before items1 of $83 million in the third quarter of 2017.

                 
(In millions of dollars)   4Q 2017     3Q 2017  
                 
Sales   $ 1,337     $ 1,292  
Operating income (loss)                
Pulp and Paper segment     58       93  
Personal Care segment     (564 )     8  
Corporate     (6 )     (12 )
Total operating (loss) income     (512 )     89  
Operating income before items1     59       83  
Depreciation and amortization     82       80  

The operating loss in the fourth quarter of 2017 was a result of the goodwill impairment charge, higher maintenance and raw material costs, lower productivity and higher costs, when compared to the operating income in the third quarter of 2017. These factors were partially offset by higher selling prices and volume and favorable exchange rates.

When compared to the third quarter of 2017, manufactured paper shipments were up 1% and pulp shipments increased 9%. The shipments-to-production ratio for paper was 100% in the fourth quarter of 2017, compared to 97% in the third quarter of 2017. Paper inventories increased by 1,000 tons and pulp inventories decreased by 50,000 metric tons when compared to the third quarter of 2017.

LIQUIDITY AND CAPITAL

Cash flow from operating activities amounted to $125 million and capital expenditures were $71 million, resulting in free cash flow1 of $54 million for the fourth quarter of 2017. Domtar’s net debt-to-total capitalization ratio1 stood at 28% at December 31, 2017 compared to 26% at September 30, 2017.

In 2017, cash flow from operating activities amounted to $449 million and capital expenditures were $182 million, resulting in free cash flow1 of $267 million.

DECLARATION OF DIVIDEND

The Board of Directors approved a 4.8% increase to its quarterly dividend (from $0.415 per share to $0.435 per share) on its common stock. The Board of Directors declared a dividend payable on April 16, 2018 to stockholders of record as of the close of business on April 2, 2018.

OUTLOOK

In 2018, costs, including freight, labor and raw materials, are expected to marginally increase. Our paper shipments should benefit from expected industry capacity closures, while paper prices should improve following the recently-announced price increases and pulp will benefit from volume growth in fluff. Personal Care is expected to be negatively impacted by an unfavorable tender balance, resulting in lower volume and operating margins.

EARNINGS CONFERENCE CALL

The Company will hold a conference call today at 10:00 a.m. (ET) to discuss its fourth quarter and fiscal year 2017 financial results. Financial analysts are invited to participate in the call by dialing 1 (800) 499-4035 (toll free – North America) or 1 (416) 204-9269 (International) at least 10 minutes before start time, while media and other interested individuals are invited to listen to the live webcast on the Domtar Corporation website at www.domtar.com.

The Company will release its first quarter 2018 earnings results on May 1, 2018 before markets open, followed by a conference call at 10:00 a.m. (ET) to discuss results. The date is tentative and will be confirmed approximately three weeks prior to the official earnings release date.

About Domtar

Domtar is a leading provider of a wide variety of fiber-based products including communication, specialty and packaging papers, market pulp and absorbent hygiene products. With approximately 10,000 employees serving more than 50 countries around the world, Domtar is driven by a commitment to turn sustainable wood fiber into useful products that people rely on every day. Domtar’s annual sales are approximately $5.2 billion, and its common stock is traded on the New York and Toronto Stock Exchanges. Domtar’s principal executive office is in Fort Mill, South Carolina. To learn more, visit www.domtar.com.

Forward-Looking Statements

Statements in this release about our plans, expectations and future performance, including the statements by Mr. Williams and those contained under “Outlook,” are “forward-looking statements.” Actual results may differ materially from those suggested by these statements for a number of reasons, including changes in customer demand and pricing, changes in manufacturing costs, future acquisitions and divestitures, including facility closings, and the other reasons identified under “Risk Factors” in our Form 10-K for 2016 as filed with the SEC and as updated by subsequently-filed Form 10-Qs. Except to the extent required by law, we expressly disclaim any obligation to update or revise these forward-looking statements to reflect new events or circumstances or otherwise.

Domtar Corporation
Highlights
(In millions of dollars, unless otherwise noted)

    Three months ended     Three months ended     Twelve months ended     Twelve months ended  
    December 31,     December 31,     December 31,     December 31,  
    2017     2016     2017     2016  
    (Unaudited)  
    $     $     $     $  
                                 
Selected Segment Information                                
Sales                                
Pulp and Paper     1,090       1,046       4,216       4,239  
Personal Care     262       242       1,005       917  
Total for reportable segments     1,352       1,288       5,221       5,156  
Intersegment sales     (15 )     (14 )     (64 )     (58 )
Consolidated sales     1,337       1,274       5,157       5,098  
Depreciation and amortization

of property, plant and equipment

                               
Pulp and Paper     64       68       254       284  
Personal Care     18       17       67       64  
Total for reportable segments     82       85       321       348  
Impairment of goodwill – Personal Care     578             578        
Impairment of property, plant

and equipment – Pulp and Paper

                      29  
Consolidated depreciation and amortization and

impairment of goodwill and property, plant and

equipment

    660       85       899       377  
                                 
Operating income (loss)                                
Pulp and Paper     58       74       250       217  
Personal Care     (564 )     13       (527 )     57  
Corporate     (6 )     (13 )     (40 )     (51 )
Consolidated operating (loss) income     (512 )     74       (317 )     223  
Interest expense, net     16       17       66       66  
(Loss) earnings before income taxes     (528 )     57       (383 )     157  
Income tax (benefit) expense     (188 )     10       (171 )     29  
Net (loss) earnings     (340 )     47       (212 )     128  
Per common share (in dollars)                                
Net (loss) earnings                                
Basic     (5.42 )     0.75       (3.38 )     2.04  
Diluted     (5.42 )     0.75       (3.38 )     2.04  
Weighted average number of common

shares outstanding (millions)

                               
Basic     62.7       62.6       62.7       62.6  
Diluted     62.7       62.7       62.7       62.7  
Cash flows from operating activities     125       155       449       465  
Additions to property, plant and equipment     71       45       182       347  

 

Domtar Corporation
Consolidated Statements of Earnings (Loss)
(In millions of dollars, unless otherwise noted)

    Three months ended     Three months ended     Twelve months ended     Twelve months ended
    December 31,     December 31,     December 31,     December 31,
    2017     2016     2017     2016
    (Unaudited)
    $     $     $     $
                               
Sales     1,337       1,274       5,157       5,098
Operating expenses                              
Cost of sales, excluding depreciation and amortization     1,076       1,003       4,131       4,035
Depreciation and amortization     82       85       321       348
Selling, general and administrative     119       113       456       427
Impairment of goodwill and property, plant and

equipment

    578             578       29
Closure and restructuring costs     2       (1 )     2       32
Other operating (income) loss, net     (8 )           (14 )     4
      1,849       1,200       5,474       4,875
Operating (loss) income     (512 )     74       (317 )     223
Interest expense, net     16       17       66       66
(Loss) earnings before income taxes     (528 )     57       (383 )     157
Income tax (benefit) expense     (188 )     10       (171 )     29
Net (loss) earnings     (340 )     47       (212 )     128
Per common share (in dollars)                              
Net (loss) earnings                              
Basic     (5.42 )     0.75       (3.38 )     2.04
Diluted     (5.42 )     0.75       (3.38 )     2.04
Weighted average number of common

shares outstanding (millions)

                             
Basic     62.7       62.6       62.7       62.6
Diluted     62.7       62.7       62.7       62.7

Domtar Corporation
Consolidated Balance Sheets at
(In millions of dollars)

       
    December 31,     December 31,  
    2017     2016  
    (Unaudited)  
    $     $  
Assets                
Current assets                
Cash and cash equivalents     139       125  
Receivables, less allowances of $7 and $7     704       613  
Inventories     757       759  
Prepaid expenses     33       40  
Income and other taxes receivable     28       31  
Total current assets     1,661       1,568  
Property, plant and equipment, net     2,765       2,825  
Goodwill           550  
Intangible assets, net     633       608  
Other assets     157       129  
Total assets     5,216       5,680  
Liabilities and shareholders’ equity                
Current liabilities                
Bank indebtedness           12  
Trade and other payables     716       656  
Income and other taxes payable     24       22  
Long-term debt due within one year     1       63  
Total current liabilities     741       753  
Long-term debt     1,129       1,218  
Deferred income taxes and other     491       675  
Other liabilities and deferred credits     326       358  
Shareholders’ equity                
Common stock     1       1  
Additional paid-in capital     1,969       1,963  
Retained earnings     895       1,211  
Accumulated other comprehensive loss     (336 )     (499 )
Total shareholders’ equity     2,529       2,676  
Total liabilities and shareholders’ equity     5,216       5,680  

Domtar Corporation
Consolidated Statements of Cash Flows
(In millions of dollars)

    For the twelve months ended  
    December 31, 2017     December 31, 2016  
    (Unaudited)  
    $     $  
Operating activities                
Net (loss) earnings     (212 )     128  
Adjustments to reconcile net (loss) earnings to cash flows from operating activities                
Depreciation and amortization     321       348  
Deferred income taxes and tax uncertainties     (207 )     9  
Impairment of goodwill and property, plant and equipment     578       29  
Net gains on disposals of property, plant and equipment     (13 )      
Stock-based compensation expense     6       7  
Other     2       (2 )
Changes in assets and liabilities, excluding the effect of sale and acquisition

of businesses

               
Receivables     (72 )     18  
Inventories     21       14  
Prepaid expenses     5       5  
Trade and other payables     35       (51 )
Income and other taxes     8       (18 )
Difference between employer pension and other post-retirement

contributions and pension and other post-retirement expense

    (32 )     (21 )
Other assets and other liabilities     9       (1 )
Cash flows from operating activities     449       465  
Investing activities                
Additions to property, plant and equipment     (182 )     (347 )
Proceeds from disposals of property, plant and equipment and sale of business     19       1  
Acquisition of businesses, net of cash acquired     (8 )     (46 )
Other           1  
Cash flows used for investing activities     (171 )     (391 )
Financing activities                
Dividend payments     (104 )     (102 )
Stock repurchase           (10 )
Net change in bank indebtedness     (12 )     12  
Change in revolving credit facility     (50 )      
Proceeds from receivables securitization facility     45       140  
Repayments of receivables securitization facility     (90 )     (70 )
Repayments of long-term debt     (64 )     (40 )
Other     1       (3 )
Cash flows used for financing activities     (274 )     (73 )
Net increase in cash and cash equivalents     4       1  
Impact of foreign exchange on cash     10       (2 )
Cash and cash equivalents at beginning of year     125       126  
Cash and cash equivalents at end of year     139       125  
Supplemental cash flow information                
Net cash payments for:                
Interest     58       64  
Income taxes     33       40  

Domtar Corporation
Quarterly Reconciliation of Non-GAAP Financial Measures
(In millions of dollars, unless otherwise noted)

The following table sets forth certain non-U.S. generally accepted accounting principles (“GAAP”) financial metrics identified in bold as “Earnings before items”, “Earnings before items per diluted share”, “EBITDA”, “EBITDA margin”, “EBITDA before items”, “EBITDA margin before items”, “Free cash flow”, “Net debt” and “Net debt-to-total capitalization”. Management believes that the financial metrics are useful to understand our operating performance and benchmark with peers within the industry. The Company calculates “Earnings before items” and “EBITDA before items” by excluding the after-tax (pre-tax) effect of specified items. These metrics are presented as a complement to enhance the understanding of operating results but not in substitution for GAAP results.

            2017     2016  
            Q1     Q2     Q3     Q4     Year     Q1     Q2     Q3     Q4     Year  
Reconciliation of “Earnings before items” to Net earnings (loss)                                                                                    
    Net earnings (loss)   ($)     20       38       70       (340 )     (212 )     4       18       59       47       128  
  (+) Impairment of goodwill and property, plant and equipment   ($)                       573       573       16       2       4             22  
  (+) Closure and restructuring costs   ($)                       1       1       2       16       8       (1 )     25  
  (+) Litigation settlement   ($)                                         2                   2  
  (-) Net gains on disposals of property, plant and equipment   ($)                 (3 )     (8 )     (11 )                              
  (-) Reversal of contingent consideration   ($)                 (2 )           (2 )                              
  (+) Impact of purchase accounting   ($)                                                     1       1  
  (-) U.S. Tax Reform   ($)                       (186 )     (186 )                              
  (=) Earnings before items   ($)     20       38       65       40       163       22       38       71       47       178  
  (/) Weighted avg. number of common shares outstanding (diluted)   (millions)     62.8       62.7       62.9       62.7       62.7       62.8       62.7       62.7       62.7       62.7  
  (=) Earnings before items per diluted share   ($)     0.32       0.61       1.03       0.64       2.60       0.35       0.61       1.13       0.75       2.84  
                                                                                         
Reconciliation of “EBITDA” and “EBITDA before items” to

Net earnings (loss)

                                                                                   
    Net earnings (loss)   ($)     20       38       70       (340 )     (212 )     4       18       59       47       128  
  (+) Income tax expense (benefit)   ($)     5       9       3       (188 )     (171 )     (3 )     6       16       10       29  
  (+) Interest expense, net   ($)     17       17       16       16       66       17       15       17       17       66  
  (=) Operating income (loss)   ($)     42       64       89       (512 )     (317 )     18       39       92       74       223  
  (+) Depreciation and amortization   ($)     80       79       80       82       321       89       87       87       85       348  
  (+) Impairment of goodwill and property, plant and equipment   ($)                       578       578       21       3       5             29  
  (-) Net gains on disposals of property, plant and equipment   ($)                 (4 )     (9 )     (13 )                              
  (=) EBITDA   ($)     122       143       165       139       569       128       129       184       159       600  
  (/) Sales   ($)     1,304       1,224       1,292       1,337       5,157       1,287       1,267       1,270       1,274       5,098  
  (=) EBITDA margin   (%)     9 %     12 %     13 %     10 %     11 %     10 %     10 %     14 %     12 %     12 %
   

EBITDA

  ($)     122       143       165       139       569       128       129       184       159       600  
  (+) Closure and restructuring costs   ($)                       2       2       2       21       10       (1 )     32  
  (+) Litigation settlement   ($)                                         2                   2  
  (-) Reversal of contingent consideration   ($)                 (2 )           (2 )                              
  (+) Impact of purchase accounting   ($)                                                     1       1  
  (=) EBITDA before items   ($)     122       143       163       141       569       130       152       194       159       635  
  (/) Sales   ($)     1,304       1,224       1,292       1,337       5,157       1,287       1,267       1,270       1,274       5,098  
  (=) EBITDA margin before items   (%)     9 %     12 %     13 %     11 %     11 %     10 %     12 %     15 %     12 %     12 %
                                                                                         
Reconciliation of “Free cash flow” to Cash flows from operating activities                                                                                    
    Cash flows from operating activities   ($)     91       121       112       125       449       97       118       95       155       465  
  (-) Additions to property, plant and equipment   ($)     (34 )     (37 )     (40 )     (71 )     (182 )     (100 )     (119 )     (83 )     (45 )     (347 )
  (=) Free cash flow   ($)     57       84       72       54       267       (3 )     (1 )     12       110       118  
                                                                                         
“Net debt-to-total capitalization” computation                                                                                    
    Bank indebtedness   ($)     2                                 6       1             12          
  (+) Long-term debt due within one year   ($)     64       1       1       1               41       64       63       63          
  (+) Long-term debt   ($)     1,188       1,203       1,164       1,129               1,211       1,237       1,309       1,218          
  (=) Debt   ($)     1,254       1,204       1,165       1,130               1,258       1,302       1,372       1,293          
  (-) Cash and cash equivalents   ($)     (111 )     (124 )     (143 )     (139 )             (97 )     (111 )     (168 )     (125 )        
  (=) Net debt   ($)     1,143       1,080       1,022       991               1,161       1,191       1,204       1,168          
  (+) Shareholders’ equity   ($)     2,685       2,770       2,886       2,529               2,736       2,716       2,754       2,676          
  (=) Total capitalization   ($)     3,828       3,850       3,908       3,520               3,897       3,907       3,958       3,844          
    Net debt   ($)     1,143       1,080       1,022       991               1,161       1,191       1,204       1,168          
  (/) Total capitalization   ($)     3,828       3,850       3,908       3,520               3,897       3,907       3,958       3,844          
  (=) Net debt-to-total capitalization   (%)     30 %     28 %     26 %     28 %             30 %     30 %     30 %     30 %        

“Earnings before items”, “Earnings before items per diluted share”, “EBITDA”, “EBITDA margin”, “EBITDA before items”, “EBITDA margin before items”, “Free cash flow”, “Net debt” and “Net debt-to-total capitalization” have no standardized meaning prescribed by GAAP and are not necessarily comparable to similar measures presented by other companies and therefore should not be considered in isolation or as a substitute for Net earnings (loss), Operating income (loss) or any other earnings statement, cash flow statement or balance sheet financial information prepared in accordance with GAAP. It is important for readers to understand that certain items may be presented in different lines by different companies on their financial statements, thereby leading to different measures for different companies.

Domtar Corporation
Quarterly Reconciliation of Non-GAAP Financial Measures – By Segment 2017
(In millions of dollars, unless otherwise noted)

The following table sets forth certain non-U.S. generally accepted accounting principles (“GAAP”) financial metrics identified in bold as “Operating income (loss) before items”, “EBITDA before items” and “EBITDA margin before items” by reportable segment. Management believes that the financial metrics are useful to understand our operating performance and benchmark with peers within the industry. The Company calculates the segmented “Operating income (loss) before items” by excluding the pre-tax effect of specified items. These metrics are presented as a complement to enhance the understanding of operating results but not in substitution for GAAP results.

            Pulp and Paper   Personal Care   Corporate   Total
            Q1’17   Q2’17   Q3’17   Q4’17   Year   Q1’17   Q2’17   Q3’17   Q4’17   Year   Q1’17   Q2’17   Q3’17   Q4’17   Year   Q1’17   Q2’17   Q3’17   Q4’17   Year
Reconciliation of Operating income (loss)

to “Operating income (loss) before items”

                                                                                   
    Operating income (loss)   ($)   34   65   93   58   250   16   13   8   (564)   (527)   (8)   (14)   (12)   (6)   (40)   42   64   89   (512)   (317)
  (+) Impairment of goodwill   ($)                   578   578                   578   578
  (-) Net gains on disposals of property, plant and

equipment

  ($)       (4)     (4)                   (9)   (9)       (4)   (9)   (13)
  (-) Reversal of contingent consideration   ($)                           (2)     (2)       (2)     (2)
  (+) Closure and restructuring costs   ($)                   2   2                   2   2
  (=) Operating income (loss) before items   ($)   34   65   89   58   246   16   13   8   16   53   (8)   (14)   (14)   (15)   (51)   42   64   83   59   248
                                                                                         
Reconciliation of “Operating income (loss)

before items” to “EBITDA before items”

                                                                                   
    Operating income (loss) before items   ($)   34   65   89   58   246   16   13   8   16   53   (8)   (14)   (14)   (15)   (51)   42   64   83   59   248
  (+) Depreciation and amortization   ($)   64   63   63   64   254   16   16   17   18   67             80   79   80   82   321
  (=) EBITDA before items   ($)   98   128   152   122   500   32   29   25   34   120   (8)   (14)   (14)   (15)   (51)   122   143   163   141   569
  (/) Sales   ($)   1,073   999   1,054   1,090   4,216   249   241   253   262   1,005             1,322   1,240   1,307   1,352   5,221
  (=) EBITDA margin before items   (%)   9%   13%   14%   11%   12%   13%   12%   10%   13%   12%             9%   12%   12%   10%   11%

“Operating income (loss) before items”, “EBITDA before items” and “EBITDA margin before items” have no standardized meaning prescribed by GAAP and are not necessarily comparable to similar measures presented by other companies and therefore should not be considered in isolation or as a substitute for Operating income (loss) or any other earnings statement, cash flow statement or balance sheet financial information prepared in accordance with GAAP. It is important for readers to understand that certain items may be presented in different lines by different companies on their financial statements, thereby leading to different measures for different companies.

Domtar Corporation

Quarterly Reconciliation of Non-GAAP Financial Measures – By Segment 2016

(In millions of dollars, unless otherwise noted)

The following table sets forth certain non-U.S. generally accepted accounting principles (“GAAP”) financial metrics identified in bold as “Operating income (loss) before items”, “EBITDA before items” and “EBITDA margin before items” by reportable segment. Management believes that the financial metrics are useful to understand our operating performance and benchmark with peers within the industry. The Company calculates the segmented “Operating income (loss) before items” by excluding the pre-tax effect of specified items. These metrics are presented as a complement to enhance the understanding of operating results but not in substitution for GAAP results.

            Pulp and Paper   Personal Care (1)   Corporate   Total
            Q1’16   Q2’16   Q3’16   Q4’16   Year   Q1’16   Q2’16   Q3’16   Q4’16   Year   Q1’16   Q2’16   Q3’16   Q4’16   Year   Q1’16   Q2’16   Q3’16   Q4’16   Year
Reconciliation of Operating income (loss)

to “Operating income (loss) before items”

                                                                                   
    Operating income (loss)   ($)   19   35   89   74   217   14   15   15   13   57   (15)   (11)   (12)   (13)   (51)   18   39   92   74   223
  (+) Impairment of property, plant and equipment   ($)   21   3   5     29                       21   3   5     29
  (+) Impact of purchase accounting   ($)                   1   1                   1   1
  (+) Closure and restructuring costs   ($)   2   21   10   (2)   31         1   1             2   21   10   (1)   32
  (+) Litigation settlement   ($)                         2       2     2       2
  (=) Operating income (loss) before items   ($)   42   59   104   72   277   14   15   15   15   59   (15)   (9)   (12)   (13)   (49)   41   65   107   74   287
                                                                                         
Reconciliation of “Operating income (loss)

before items” to “EBITDA before items”

                                                                                   
    Operating income (loss) before items   ($)   42   59   104   72   277   14   15   15   15   59   (15)   (9)   (12)   (13)   (49)   41   65   107   74   287
  (+) Depreciation and amortization   ($)   73   72   71   68   284   16   15   16   17   64             89   87   87   85   348
  (=) EBITDA before items   ($)   115   131   175   140   561   30   30   31   32   123   (15)   (9)   (12)   (13)   (49)   130   152   194   159   635
  (/) Sales   ($)   1,085   1,054   1,054   1,046   4,239   216   228   231   242   917             1,301   1,282   1,285   1,288   5,156
  (=) EBITDA margin before items   (%)   11%   12%   17%   13%   13%   14%   13%   13%   13%   13%             10%   12%   15%   12%   12%

“Operating income (loss) before items”, “EBITDA before items” and “EBITDA margin before items” have no standardized meaning prescribed by GAAP and are not necessarily comparable to similar measures presented by other companies and therefore should not be considered in isolation or as a substitute for Operating income (loss) or any other earnings statement, cash flow statement or balance sheet financial information prepared in accordance with GAAP. It is important for readers to understand that certain items may be presented in different lines by different companies on their financial statements, thereby leading to different measures for different companies.

(1) On October 1, 2016, the Company acquired 100% of the shares of Home Delivery Incontinent Supplies Co. in the United States.

Domtar Corporation
Supplemental Segmented Information
(In millions of dollars, unless otherwise noted)

        2017     2016  
        Q1     Q2     Q3     Q4     Year     Q1     Q2     Q3     Q4     Year  
Pulp and Paper Segment                                                                                    
Sales   ($)     1,073       999       1,054       1,090       4,216       1,085       1,054       1,054       1,046       4,239  
Operating income   ($)     34       65       93       58       250       19       35       89       74       217  
Depreciation and

amortization

  ($)     64       63       63       64       254       73       72       71       68       284  
Impairment of property,

plant and equipment

  ($)                                   21       3       5             29  
                                                                                     
Paper                                                                                    
Paper Production   (‘000 ST)     709       715       745       724       2,893       785       715       726       714       2,940  
Paper Shipments –

Manufactured

  (‘000 ST)     745       698       722       726       2,891       786       752       744       739       3,021  
Communication Papers   (‘000 ST)     622       582       597       600       2,401       657       627       620       618       2,522  
Specialty and Packaging

Papers

  (‘000 ST)     123       116       125       126       490       129       125       124       121       499  
Paper Shipments – Sourced

from 3rd parties

  (‘000 ST)     29       26       29       25       109       32       29       35       27       123  
Paper Shipments – Total   (‘000 ST)     774       724       751       751       3,000       818       781       779       766       3,144  
Pulp                                                                                    
Pulp Shipments(a)   (‘000 ADMT)     453       383       424       462       1,722       369       360       369       415       1,513  
Pulp Shipments mix(b):                                                                                    
Hardwood Kraft Pulp   (%)     4 %     3 %     7 %     5 %     5 %     5 %     4 %     4 %     8 %     5 %
Softwood Kraft Pulp   (%)     67 %     62 %     61 %     54 %     61 %     66 %     61 %     63 %     63 %     63 %
Fluff Pulp   (%)     29 %     35 %     32 %     41 %     34 %     29 %     35 %     33 %     29 %     32 %
                                                                                     
Personal Care Segment                                                                                    
Sales   ($)     249       241       253       262       1,005       216       228       231       242       917  
Operating income (loss)   ($)     16       13       8       (564 )     (527 )     14       15       15       13       57  
Depreciation and

amortization

  ($)     16       16       17       18       67       16       15       16       17       64  
Impairment of goodwill   ($)                       578       578                                
                                                                                     
Average Exchange Rates   $US / $CAN     1.323       1.344       1.253       1.272       1.297       1.375       1.289       1.305       1.333       1.325  
    $CAN / $US     0.756       0.744       0.798       0.786       0.771       0.727       0.776       0.766       0.750       0.755  
    € / $US     1.066       1.100       1.175       1.178       1.130       1.103       1.130       1.116       1.078       1.107  

(a) Figures represent Pulp Shipments to third parties.
(b) Percentages include Pulp Shipments to our Personal Care segment.

Note: the term “ST” refers to a short ton and the term “ADMT” refers to an air dry metric ton.

1 Non-GAAP financial measure. Refer to the Reconciliation of Non-GAAP Financial Measures in the appendix.

 

Source: Domtar Corporation

Domtar Corporation
INVESTOR RELATIONS
Nicholas Estrela, 514-848-5049
Director
Investor Relations
or
MEDIA RELATIONS
David Struhs, 803-802-8031
Vice-President
Corporate Services and Sustainability

 

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